PLAZA CENTRES p.l.c. 

Annual Financial Report and 

Consolidated Financial Statements

31 December 2021

List of Contents

Directors' report     

Corporate Governance - Statement of compliance     

Remuneration report     

Statements of financial position     

Income statements     

Statements of comprehensive income     

Statements of changes in equity     

Statements of cash flows     

Notes to the financial statements     

Independent auditor's report 

Directors' report 

The Directors present their report and the audited consolidated financial statements for the year ended 31 December 2021.

Principal activities

The Group's principal activity is to lease, manage and market the Plaza Shopping and Commercial Centre (owned by the Parent Company). As previously announced Tigne Place Limited (only subsidiary of the Group) was placed into voluntary liquidation on 31 December 2021, following the sale of the Tigne Place Commercial Property which was executed in September 2020.

Review of business

The uneven economic recovery, with retail being one of the laggard sectors in terms of the recovery led the Parent Company to extend its support through different forms of rent reduction to its tenants. This was felt to be appropriate both commercially and morally as the measures being introduced throughout the year by local authorities to contain the spread of COVID-19 continued to have a negative impact on  business in general. This environment contributed to a subdued demand for rental space, especially retail space and consequently leading to longer periods to fill any spaces becoming vacant during the year. Having said this, the office spaces are fully occupied as at 31 December 2021 and the overall activity improved compared to a year before when the pandemic broke.   

Financial results

For the financial year ended 31 December 2021, the Group generated revenue of €2,533,514 a decrease of 8.09% when compared to €2,756,523 in 2020. The sale of Tigne Place Commercial Property in September 2020 automatically contributed to a reduction in the consolidated revenue when compared to previous year.  With respect to the revenue generated by the Parent Company during 2021, this amounted to €2,533,514; i.e. an improvement of 17.21% when compared to previous year's revenue of €2,161,468. Similarly, the Group's Earnings before Interest, Taxation, Depreciation and Amortisation (EBITDA) decreased by 15.5% from €1,931,369 (2020) to €1,632,068 (2021); whilst the EBITDA of the Company increased by 13.07% from €1,449,754 (2020) to €1,639,236 (2021).  Ultimately, the Group's profit before tax for 2021 increased by 13.7% to €868,500, from €763,873 in 2020. Taxation increased from €294,532 (2020) to €347,564 (2021). The Group profit after tax increased to €520,936 (2020: €469,341). Such results came about although Plaza,  as mentioned above, had to take commercial decisions which negatively impacted its revenues, costs and hence profitability, in the form of rental discounts and absorbing a higher percentage of common area costs.

The average occupancy level of the Parent Company during the year stood at 84% (2020: 89%).

The Group's operating costs amounted to €1,420,111 (2020: €1,511,698) whilst the cost to income ratio increased to 56.1% (2020: 54.8%).

Outlook for 2022

The Board of Directors is cautiously optimistic regarding the adverse economic effects of the Covid 19 pandemic on the Maltese economy. Malta's vaccination programme has successfully extended widely the herd immunity level. The worst is considered to be behind us. The inflow of tourists, a key factor influencing aggregate economic demand, is once again rising.

However, the economic environment for 2022 is indeed very challenging as a result of a series of factors unrelated to the pandemic. The armed conflict in the Ukraine is reinforcing constraints in the supply chain of crucial resources in several key economic sectors thereby pushing up prices worldwide in product, labour and financial markets. So far the business in Plaza has largely contained these pressures. But it is still difficult to estimate any potentially damaging effect. The Board of Directors together with Management will closely monitor the situation and will take the necessary steps to mitigate and countervail the situation.

In line with the Company's strategic direction, Plaza continues to explore the feasibility and attractiveness of a number of growth opportunities. In fact it is currently in the process of incorporating a new company which is expected to gradually contribute to the diversification of the Group's trading activity.

Financial risk management

During 2021, there has been no changes in the Group's financial risk management. Information relating to the Group's financial risk management is disclosed in Note 2 to the financial statements.

Results, dividends and reserves

The consolidated financial results are set out in the income statement. The Directors recommend the payment of a net dividend of €600,000 in respect of the current financial year (2020: €1,400,000). Retained earnings carried forward at the end of the financial reporting period amounted to €4,035,376 (2020: €3,903,192) for the Group and €4,005,036 (2020: €515,708) for the Parent Company.

Directors

The Directors of the Parent Company who held office during the year were:

Charles J. Farrugia (Chairman)

David G. Curmi - resigned on 23 June 2021

Emanuel P. Delia

Alan Mizzi - resigned on 23 June 2021

Brian R. Mizzi 

Alfredo Munoz Perez - appointed on 23 June 2021

Etienne Sciberras

Gerald J. Zammit

The Directors are required in terms of the Parent Company's Articles of Association to retire at the forthcoming Annual General Meeting and may offer themselves for re-appointment or re-election.

A shareholder holding not less than 14 per cent of voting rights of the issued share capital or a number of shareholders who between them hold not less than 14 per cent, shall appoint one director for every such 14 per cent holding by letter addressed to the Parent Company.  All shares not utilised to make appointments in terms of the above shall be entitled to vote at the Annual General Meeting to elect the remaining directors.  The Memorandum and Articles of the Parent Company provide for a Board of Directors of not less than five and not more than seven members.

Share capital of the Parent Company 

The Parent Company has an authorised share capital of 75,000,000 ordinary shares of €0.20 each, and issued and fully paid share capital of 25,492,000 ordinary shares with a nominal value of €0.20 each. 

The Parent Company is authorised pursuant to its Memorandum and Articles of Association to purchase its own shares, provided that appropriate authority has been given to the Directors for that purpose. In this respect, during the Annual General Meeting held on 14 October 2020, the shareholders authorised the Company Directors to re-purchase up to 10% of the total issued share capital of the Company. The resolution remained in place for a period of 18 months and shares so re-purchased were eventually cancelled in accordance with the provisions of the Companies Act (Cap. 386). As at 31 December 2020, 2,750,000 ordinary shares had been re-purchased and such shares have been cancelled officially during the current financial year. Further information relating to the Parent Company's purchase of own shares is disclosed in Note 11 to the financial statements.

The Parent Company's share capital consists of only one class of shares, and all shares in that class are admitted to trade on the Malta Stock Exchange (''MSE'').  All shares in the Parent Company are freely transferable.  There are no shareholders having special control rights in the Parent Company, nor are there any restrictions on voting rights in the Parent Company.

The Parent Company does not operate any employee share option schemes.

The Parent Company is not aware of any agreements between shareholders with respect to the transfer of shares or the exercise of voting rights.

No disclosures are being made pursuant to Listing Rules 5.64.10 and 5.64.11 as these are not applicable to the Parent Company.

The following are the shareholders holding more than 5 per cent of the voting issued share capital of the Parent Company:

Statement of Directors' responsibilities for the financial statements

The Directors are required by the Maltese Companies Act (Cap. 386) to prepare financial statements which give a true and fair view of the state of affairs of the Group and the Parent Company as at the end of each reporting period and of the profit or loss for that period.

In preparing the financial statements, the Directors are responsible for:

• ensuring that the financial statements have been drawn up in accordance with International Financial Reporting Standards as adopted by the EU;

• selecting and applying appropriate accounting policies;

• making accounting estimates that are reasonable in the circumstances;

• ensuring that the financial statements are prepared on the going concern basis unless it is inappropriate to presume that the Group and the Parent Company will continue in business as a going concern.

The Directors are also responsible for designing, implementing and maintaining internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and that comply with the Maltese Companies Act     (Cap. 386).  They are also responsible for safeguarding the assets of the Group and the Parent Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The financial statements of Plaza Centres p.l.c. for the year ended 31 December 2021 are included in the Annual Financial Report 2021, which is made available on the Parent Company's website. The Directors are responsible for the maintenance and integrity of the Annual Financial Report on the website in view of their responsibility for the controls over, and the security of, the website.  Access to information published on the Parent Company's website is available in other countries and jurisdictions, where legislation governing the preparation and dissemination of financial statements may differ from requirements or practice in Malta.

The Directors further confirm that, to the best of their knowledge:

•  the financial statements give a true and fair view of the financial position of the Group and the Parent Company as at 31 December 2021, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU; and

• the Annual Report includes a fair review of the development and performance of the business and the position of the Group and the Parent Company, together with a description of the principal risks and uncertainties that it faces.

Going concern basis

After making due enquiries, the Directors have a reasonable expectation, at the time of approving the financial statements, that the Group and the Parent Company have adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the financial statements.

Auditors 

PricewaterhouseCoopers have indicated their willingness to continue in office and a resolution for their re-appointment will be proposed at the Annual General Meeting.

The Directors' Report was signed on behalf of the Board of Directors on 27 April 2022 by Charles J Farrugia (Chairman) and Etienne Sciberras (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report. 

Registered office:     Company secretary:

The Plaza Commercial Centre     Louis de Gabriele

Level 3, Bisazza Street

Sliema   SLM 1640     Telephone Number:

Malta     +356 21343832

Corporate Governance - Statement of compliance

1.     Introduction

Pursuant to the Capital Markets Rules issued by the Listing Authority, Plaza Centres p.l.c. ("Plaza") should endeavour to adopt the Code of Principles of Good Corporate Governance contained in Appendix 5.1 to Chapter 5 of the Capital Markets Rules (the "Code"). In terms of Capital Markets Rule 5.94, Plaza hereby reports on the extent of its adoption of the principles of the Code for the financial year being reported upon. 

Plaza acknowledges that the Code does not dictate or prescribe mandatory rules, but recommends principles of good practice. However, the Directors strongly believe that such practices are generally in the best interests of Plaza and its shareholders and that compliance with the principles of good corporate governance is not only expected by investors but also evidences the Directors' and Plaza's commitment to a high standard of good governance.

The Board of Directors of Plaza (the "Board") has carried out a review of Plaza's compliance with the Code for the financial year being reported upon.

2.     General

Plaza's governance principally lies with its Board which is responsible for the overall determination of Plaza's policies and business strategies. Plaza's principal activity is to lease, manage and market its Shopping and Commercial Centres. 

Plaza has adopted a corporate decision-making and supervisory structure that is tailored to suit its requirements and designed to ensure the existence of adequate controls and procedures within Plaza, whilst retaining an element of flexibility essential to allow Plaza to react promptly and efficiently to the dictates of its business, its size and the economic conditions in which it operates. The Directors are of the view that it has employed structures which are most suitable for the size, nature and operations of Plaza. Accordingly in general, the Directors believe that Plaza has adopted appropriate structures to achieve an adequate level of good corporate governance, together with an adequate system of control in line with Plaza's requirements.

This corporate governance statement (the "Statement") will now set out the structures and processes in place within Plaza and how these effectively achieve the goals set out in the Code. For this purpose, this Statement will make reference to the pertinent principles of the Code and then set out the manners in which the Directors believe that these have been adhered to. Where Plaza has not complied with any of the principles of the Code, this Statement will give an explanation for non-compliance.

For the avoidance of doubt, reference in this Statement to compliance with the principles of the Code means compliance with the Code's main principles and the Code provisions. 

3.     Compliance with the Code

Principles One to Five

Principles One to Five of the Code deal fundamentally with the role of the Board and of the Directors.

The Directors believe that for the period under review Plaza has generally complied with the requirements for each of these principles.

Principle One: The Board

The Board is composed of members who are fit and proper to direct the business of Plaza with honesty, competence, and integrity. All the members of the Board are fully aware of, and conversant with, the statutory and regulatory requirements connected to the business of Plaza. The Board is accountable for its performance and that of its delegates to shareholders and other relevant stakeholders. 

The Board is responsible for determining Plaza's strategic aims and organisational structure, whilst ensuring that Plaza has the appropriate mix of financial and human resources to meet its objectives and improve its performance.

The Board has throughout the period under review provided the necessary leadership in the overall direction of Plaza and has adopted prudent and effective systems whereby it obtains timely information from the Chief Executive Officer (the "CEO"). This ensures an open dialogue between the CEO and Directors at regular intervals, and not only at meetings of the Board.  The Directors believe that the attendance of the CEO at Directors' meetings as well as regular reporting and ongoing communication through the Executive Committee has improved the communication between the Board and the CEO and ensures continued prosperity of Plaza as regular liaison between the Board and the CEO enhances the probability of risks being effectively assessed and managed.

Plaza has a structure that ensures a mix of executive and non-executive Directors that enables the Board, and particularly the non-executive Directors to have direct information about Plaza's performance and business activities.

Principle Two: Chairman and Chief Executive

In line with the requirements of Code principle Two, Plaza has segregated the functions of the CEO and the Chairman. Whilst the CEO heads the Executive Committee and management, the Chairman's main function is to lead the Board and set its agenda, a function which the Board believes has been conducted in compliance with the dictates of Code Provision 2.2. The Chairman is also responsible to ensure that the Board receives precise, timely and objective information so that the Directors can take sound decisions and effectively monitor the performance of Plaza. The Chairman exercises independent judgement and ensures that, during Board meetings, there is effective communication with stakeholders as well as active engagement by all Directors for the discussion of complex and/or contentious issues.  

The CEO is accountable to the Board of Plaza for all business operations. He has the power and authority to appoint the persons to fill in the post of each member of the Executive Committee. He also has the discretion to ask any one or more of such members, from time to time, to address the Board on matters relating to the operations of Plaza.

Principle Three: Composition of the Board

The composition of the Board, in line with the requirements of Code principle Three, is composed of executive and non-executive Directors, including independent non-executives. During 2021, the Board was composed of two directors having an executive role as part of the Executive Committee and five other Directors acting in a non-executive capacity. The members of the Board for the year under review were Mr. Charles J. Farrugia (Chairman), Mr. David G. Curmi (resigned on 23 June 2021), Prof. Emanuel P. Delia, Mr. Alan Mizzi (resigned on 23 June 2021), Mr. Brian R. Mizzi, Mr. Etienne Sciberras, Mr Alfredo Munoz Perez (appointed on 23 June 2021)  and Mr. Gerald J. Zammit. Pursuant to generally accepted practices, as well as article 55.1 of Plaza's Articles of Association, the appointment of Directors to the Board is reserved exclusively to Plaza's shareholders, except in so far as an appointment is made to fill a vacancy on the Board. 

The Board meets on a regular basis. Board meetings usually focus on strategy, operational performance and financial performance. The Board also delegates specific responsibilities to the CEO and ad-hoc Committees as may be required from time to time. 

For the purposes of Code provision 3.2, the Board considers each of the non-executive Directors as independent within the meaning of the Code, notwithstanding the relationships disclosed hereunder.  The independent, non-executive Directors who held office as at 31 December 2021 were the following:

1. Prof. Emanuel P. Delia - the chairman of Amalgamated Investments SICAV p.l.c., which company is a shareholder of Plaza;

2. Brian R. Mizzi - a director of Mizzi Organisation Limited, which company is a shareholder of Plaza;

3. Alfredo Munoz Perez - a senior officer of Mapfre Inmuebles, which company forms part of the Mapfre Group;

4. Etienne Sciberras -  a Chief Executive Officer of MAPFRE MSV Life p.l.c.(appointed as CEO of Mapfre MSV Life p.l.c. on 1 April 2021), which company is a shareholder of Plaza. 

The only relationship that could impact the independence of the non-executive Directors refers to their status as directors or senior officers of other entities that are shareholders of Plaza.  

None of the non-executive Directors:

1. are or have been employed in any capacity by Plaza; 

2. receive significant additional remuneration from Plaza; 

3. have close family ties with any of the executive members of the Board;

4. have been within the last three years an engagement partner or a member of the audit team of the present or past external auditor of Plaza; and

5. have a significant business relationship with Plaza.

In terms of Code provision 3.4, each non-executive director has declared in writing to the Board that he/she undertakes:

• to maintain in all circumstances his/her independence of analysis, decision and action;

• not to seek or accept any unreasonable advantages that could be considered as compromising his/her independence; and

• to clearly express his/her opposition in the event that he/she finds that a decision of the Board may harm Plaza.

Each non-executive director has complied with such an undertaking for the period under review. 

Principle Four: The Responsibilities of the Board

In terms of Code principle Four, it is the Board's responsibility to ensure a system of accountability, monitoring, strategy formulation and policy development. Accordingly, the Board is entrusted with the overall direction, administration and management of the Group (i.e. the Company and Tigne Place Ltd (C 76364) and in fulfilling this mandate, assumes responsibility for the following:

• Review, evaluation and approval of the business plan and budgets that are submitted by management and work with management towards their successful implementation;

• Identifying the principal business risks for the Group and overseeing the implementation and monitoring of appropriate risk management systems;

• Ensuring that effective internal control systems are in place and reviewing their effectiveness;

• Review the assignment of management responsibilities, the performance of senior management and monitoring the establishment of appropriate systems of succession planning;

• Reviewing, evaluating and approving the compensation strategy for senior management and ensuring that the Group has in place a policy to enable it to communicate effectively with shareholders, other stakeholders and the public generally;  

• Reviewing and approving various management reports as well as annual financial plans, including capital budgets, together with the regular review of the strategies, processes and policies adopted for implementation; and 

• Participating in training and refresher courses, and keeping abreast with applicable regulatory issues, at least annually.

The Executive Committee

Whilst these are matters which are reserved for the Board to determine, the Board believes that  this responsibility includes the appropriate delegation of authority and accountability for Plaza's day to day business to the Executive Committee, in a manner that is designed to provide high levels of comfort to the Directors that there is proper monitoring and accountability apart from the appropriate implementation of corporate policy. Nonetheless, the Executive Committee operates under its formal Terms of Reference and matters relating to administration, finance and strategy are discussed at Board level. 

During 2021, the Executive Committee was composed of the following members:

Mr. Charles J. Farrugia - the Chairman of the Board; 

Mr. Steve Abela - the CEO; and 

Mr. Gerald J. Zammit - Director. 

The Executive Committee has met 9 times during the year under review (2020: 10).

The Audit Committee

     Plaza has established an Audit Committee in line with the requirements of the Capital Markets Rules whose principal role is the monitoring of internal systems and control. Unlike the provisions of the Code, which are not mandatory in nature, the Directors acknowledge that the requirement of having an Audit Committee in place is an obligation under the Capital Markets Rules. The members of the Audit Committee for the year under review were Mr. Etienne Sciberras (Chairman of the Audit Committee), Prof. Emanuel P. Delia and Mr. Brian R. Mizzi. The Directors believe that Mr. Etienne Sciberras is independent and competent in accounting and/or auditing in terms of Capital Markets Rule 5.117. The Directors believe that Mr. Etienne Sciberras satisfies the independence criteria as he is independent within the meaning of the Code as explained above in this Statement.  Furthermore, Mr. Sciberras is also competent in accounting/auditing given his extensive experience in the financial services sector and has the necessary skills to undertake the responsibilities required of him.

The terms of reference of the Audit Committee, approved by the Board, are modelled on the recommendations of the Capital Markets Rules. The terms of reference of the Audit Committee include support to the Board in its responsibilities in dealing with issues of risk, control and governance, and associated assurance. The Board has set formal terms of establishment and the terms of reference of the Audit Committee which set out its composition, role and function, the parameters of its remit as well as the basis for the processes that it is required to comply with.

They include, inter alia, the responsibility of reviewing the financial reporting process and policies, the system of internal control and management of financial risk, the audit process, any transactions with related parties and Plaza's process for monitoring compliance with laws and regulations. The external auditors are invited to attend specific meetings of the Audit Committee and are entitled to convene a meeting if they consider that it is necessary. 

When the Audit Committee's monitoring and review activities reveal cause for concern or scope for improvement, it shall make recommendations to the Board on the action needed to address the issue or make improvements. 

In the period under review, the Audit Committee met 4 times (2020: 4).

Board of Directors

The role of the Board is exercised in a manner designed to ensure that it can function independently of management and effectively supervises the operations of Plaza. Each Board meeting is presented with a report by the CEO. Such report regularly includes: (i) Plaza's management accounts circulated monthly to each Director; (ii) a management commentary on the results and on relevant events and decisions; and (iii) background information on any matter requiring the approval of the Board. 

In fulfilling its mandate, the Board assumes responsibility to: 

1. Establish appropriate corporate governance standards; 

2. Review, evaluate and approve, on a regular basis, long-term plans for Plaza; 

3. Review, evaluate and approve Plaza's budgets and forecasts; 

4. Review, evaluate and approve major resource allocations and capital investments; 

5. Review the financial and operating results of Plaza; 

6. Ensure appropriate policies and procedures are in place to manage risks and internal control; 

7. Review, evaluate and approve the overall corporate organisation structure, the assignment of management responsibilities and plans for senior management development including succession; 

8. Review, evaluate and approve compensation to senior management; and

9. Review periodically Plaza's objectives and policies relating to social, health and safety and environmental responsibilities. 

The Board does not consider it necessary to constitute separate committees to deal, inter alia, with item (h) above, as might be appropriate in a larger company. In ensuring compliance with other statutory requirements and with continuing listing obligations, the Board is advised directly, as appropriate, by its appointed broker, legal advisor and other advisors. 

In accordance with the above, the Board engages in periodic strategic reviews, which include consideration of long-term projections and the revaluation of the business objectives in the short term. Regular budgets and strategic plans are prepared and performance against these plans is monitored and reported to the Board using key risk and performance indicators annually, so that corrective measures can be taken to address any deficiencies and to ensure the future sustainability of the Company. These key risk and performance indicators are benchmarked against industry norms so that the Company's performance can be effectively evaluated.

As part of succession planning, the Board and CEO ensure that Plaza implements appropriate schemes to recruit, retain and motivate employees and senior management.

Directors are entitled to seek independent professional advice at any time on any aspect of their duties and responsibilities, at Plaza's expense. 

During the financial year under review, the Board held 8 meetings (2020: 14). 

Principle Five: Board Meetings

The Board believes that it complies fully with the requirements of this principle and the relative Code provisions, in that it has systems in place to ensure the reasonable notice of meetings of the Board and the circulation of discussion papers in advance of meetings so as to provide adequate time to Directors to prepare themselves for such meetings. To this effect, advance notice of ad hoc meetings of the Board is also given, so as to allow Directors sufficient time to re-arrange their commitments in order to be able to participate. Minutes are prepared during all Board meetings recording faithfully attendance, discussions and resolutions. These minutes are subsequently circulated to all Directors as soon as practicable after the meeting. 

The Board meets as often and as frequently required in line with the nature and demands of the business of Plaza. Directors attend meetings on a frequent and regular basis and dedicate the necessary time and attention to their duties as directors of Plaza.  

The following is the attendance at board meetings of each of the Directors during 2021:

Mr. Charles J. Farrugia - Chairman     8

Mr. David G. Curmi - resigned 23 June 2021     3

Prof. Emanuel P. Delia      8

Mr. Alan Mizzi - resigned 23 June 2021       3

Mr. Brian R. Mizzi     6

Mr. Etienne Sciberras     7

Mr. Alfredo Munoz Perez - appointed 23 June 2021     5

Mr. Gerald J. Zammit     8

The Chairman ensures that all relevant issues are on the agenda supported by all available information, whilst encouraging the presentation of views pertinent to the subject matter and giving all Directors every opportunity to contribute to relevant issues on the agenda. The agenda on the Board strikes a balance between long-term strategic and short-term performance issues. 

Principle Six: Information and Professional Development

The Board believes that this principle has been duly complied with for the period under review.  The CEO is appointed by the Directors and enjoys the full confidence of the Board. The CEO actively participates in the appointment of senior management and ensures that there is adequate training in Plaza for directors, management and employees.  The CEO adopts an open door policy with all staff and conducts various informal meetings with each employee to assess and monitor performance as well as staff morale. Staff duties are listed by role in order to make it easier for succession planning. Additionally, all new employees, staff, executives and Directors, undergo an induction programme upon joining, which covers, to the extent necessary, the Company's organization and activities and his/her responsibilities. 

Principle Seven: Evaluation of the Board's performance

Over the period under review it is the Board's opinion that all members of the Board, individually and collectively, have contributed in line with the required levels of diligence and skill. In addition, the Board believes that its current composition endows the Board with a cross-section of skills and experience and achieves the appropriate balance required for it to function effectively. During the year, the Directors carried out a self-evaluation performance analysis, including the Chairman. The results of this analysis did not require any material changes in Plaza's corporate governance structure.

Principle Eight: Committees

Code principle Eight A deals with the establishment of a Remuneration Committee for Plaza aimed at developing policies on remuneration for Directors and senior executives and devising appropriate remuneration packages. 

The Board has established a remuneration policy for Directors and senior executives, underpinned by formal and transparent procedures for the development of such a policy and the establishment of the remuneration packages of individual Directors.

The Board notes that the organisational set-up of Plaza consisted of 13 employees, of whom 1 is  considered to be a senior officer. The size of its human resource does not, in the opinion of the Directors, warrant the establishment of an ad-hoc Remuneration Committee. Remuneration policies have therefore been retained within the remit of the Board itself. The Directors of Plaza are entitled to a variable bonus which is dependant on the performance of the Group (i.e. the Company and Tigne Place Ltd (C 76364)  and which is calculated through an objective and automatic formula, being: (5 x Outperformance) x base remuneration of the directors, where the term 'Outperformance' refers to the percentage by which the profits before tax of  The Group registered for a particular financial year exceed 105% of the profits before tax registered by the Group for the relative previous year, in both cases, in accordance with the audited consolidated financial statements for the respective years. In no case shall the total bonuses payable exceed €60,000. Further, the CEO is entitled to a cash performance bonus, which varies in line with improvements in Plaza's profitability and which is subject to the review of the Board.

The aggregate amount of fixed remuneration paid to all Directors of Plaza was €68,970 during 2021 and each Director received an annual remuneration of €7,200, pro rata depending on appointment and/or resignation, apart from the Chairman who received €10,000. The aggregate amount of remuneration paid to all Directors also includes the amount of €3,900, received by each of the three directors who sit on the Audit Committee, amounting in total to €11,700 as an annual Audit Committee remuneration.  The aggregate amount of remuneration paid to all Directors also includes the amount of €3,900 received by each of the two directors who sit on the Executive Committee, amounting in total to €7,800 as an annual Executive Committee remuneration. The total emoluments received by the CEO during the current financial year amounted to €81,721. The Directors are entitled for a variable bonus with respect to the group's performance during the current financial year.  An aggregate payment of €39,978 will be paid to the directors during 2022, with respect to the performance bonus for the current year.  

Code principle Eight B of the Code deals with the requirement of a formal and transparent procedure for the appointment of Directors.

The Board believes that the main principle has been duly complied with, in that it is the Articles of Association of Plaza themselves that establish a formal and transparent procedure for the appointment of Directors. The Company has however not established a Nominations Committee as suggested by the Code.

Principles Nine and Ten: Relations with Shareholders and with the Market, and Institutional Shareholders

The Board serves the legitimate interests of Plaza, accounts to shareholders and bondholders fully and ensures that Plaza communicates with the market effectively through a number of company announcements that it publishes, informing the market of significant events relevant to Plaza and its business, and of developments relevant to investors. Thus, Plaza recognises the importance of maintaining a dialogue with the market to ensure that its strategies and performance are well understood and disclosed in a timely manner. In this respect, the Board notes that the reaction of market participants to Plaza's communication strategy of important events has been positive.

Plaza will soon be holding its 22^nd Annual General Meeting where the Board intends to communicate directly with shareholders on the performance of Plaza over the last financial year and to inform shareholders of the challenges that lie ahead. 

Business at Plaza's Annual General Meeting covers the approval of the Annual Report and Audited Financial Statements, the declaration of a dividend, if any, the election of Directors, the determination of the maximum aggregate emoluments that may be paid to Directors, the appointment of auditors and the authorisation of the Directors to set the auditors' remuneration. 

Apart from the Annual General Meeting, Plaza intends to continue with its active communication strategy with the market, and shall accordingly continue to communicate with its shareholders and bondholders and the market by way of the Annual Report and Audited Financial Statements, by publishing its results on a six-monthly basis during the year, and by way of company announcements to the market in general. Plaza recognises the importance of maintaining a dialogue with the market to ensure that its strategies and performance are well understood and disclosed to the market in a timely manner. Plaza's website (www.plaza-shopping.com) also contains information about Plaza and its business, which is a source of further information to the market. 

Plaza's Articles of Association allow minority shareholders to call special meetings on matters of importance to Plaza, provided that the minimum threshold of ownership established in the Articles of Association is met. 

Principle Eleven: Conflicts of Interest

It is the practice of the Board that when a potential conflict of interest arises in connection with any transaction or other matter, the potential conflict of interest is declared in line with internal policies so that steps may be taken to ensure that such items are appropriately addressed. The steps taken will depend on the circumstances of the particular case, and may include the setting up of ad-hoc committees of independent Directors that would assist and monitor management as appropriate in the execution of specific transactions. By virtue of the Memorandum and Articles of Association, the Directors are obliged to keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with that of Plaza. The Board member concerned shall not take part in the assessment by the Board in determining whether a conflict of interest exists. A director shall not participate in a discussion concerning matters in which he has a conflict of interest (unless the Board finds no objection), nor shall he vote in respect of any contract, arrangement, transaction or proposal in which he has material interest in accordance with the Memorandum and Articles of Association. The Board believes that this is a procedure that achieves compliance with both the letter and rationale of Code principle eleven. 

There were no changes in the Directors' interest in the shareholding of the Company between year-end and 27 April 2022. Commercial relationships between Plaza and other companies with common Directors and shareholders may include the purchase of supplies and services, and the letting of outlets. Such contracts are entered into in the ordinary course of business and terms and conditions of new contracts negotiated are reviewed by Plaza's Audit Committee. During the financial year under review, these contracts included: supplies and services of €11,689 (2020: €7,621) and income from lettings and premia of €84,742 (2020: €148,241). Other related party transactions as defined by IAS 24 are disclosed in Note 30 to the financial statements.

As at the date of this Statement, the interests of the Directors in the shares of Plaza, including indirect shareholdings through other companies, were as follows:

• Brian R. Mizzi has an indirect interest in the share capital of Plaza by virtue of his ultimate effective holding of 8.33% (2020: 8.33%) shares in Mizzi Organisation Limited that holds 4.76% (2020: 5.18%) shareholding in Plaza Centres p.l.c.

• Charles J. Farrugia has a direct interest in the share capital of Plaza by virtue of his holding of 0.09% (2020: 0.08%) shares in Plaza Centres p.l.c.

• Gerald J. Zammit has a direct interest in the share capital of Plaza by virtue of his holding of 0.01% (2020: 0.01%) shares in Plaza Centres p.l.c.

Principle Twelve: Corporate Social Responsibility

The Directors are committed to high standards of ethical conduct and to contribute to the development of the well-being of employees and their families as well as the local community and society at large. Plaza recognises the importance of its role in the corporate social responsibility arena and seeks to ensure that in its operations the environment is respected. The Directors are also aware of the importance of having good relations with stakeholders and strive to work together with them in order to invest in human capital and safety issues and to adopt environmentally friendly responsible practices. 

4.     Non-Compliance with the Code

The Directors set out below the Code Provisions with which they do not comply and an explanation as to the reasons for such non-compliance:

5.     Internal control

The Board is ultimately responsible for Plaza's system of internal controls and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate risk to achieve  business objectives, and can provide only reasonable, and not absolute, assurance against normal business risks or loss.

Through the Audit Committee, the Board reviews the effectiveness of Plazaʼs system of internal controls.

The key features of Plaza's system of internal control are as follows:

Organisation

Plaza operates through the CEO and Executive Committee with clear reporting lines and delegation of powers.

Control Environment

Plaza is committed to the highest standards of business conduct and seeks to maintain these standards across all its operations. Company policies and employee procedures are in place for the reporting and resolution of improper activities.

Plaza has an appropriate organisational structure for planning, executing, controlling and monitoring business operations in order to achieve its objectives.

Risk Identification

Management is responsible for the identification and evaluation of key risks applicable to their respective areas of business.

6.     General meetings

The general meeting is the highest decision making body of Plaza and is regulated by Plaza's Articles of Association. All shareholders registered on the register of members of Plaza on a particular record date are entitled to attend and vote at general meetings. A general meeting is called by twenty-one (21) days' notice. 

At an Annual General Meeting what is termed as "ordinary business" is transacted, namely, the declaration of a dividend, the consideration of the financial statements and the reports of the Directors and the auditors, the election of Directors, the appointment of auditors and the fixing of remuneration of Directors and auditors. Other business which may be transacted at a general meeting (including at the Annual General Meeting) will be dealt with as "Special Business".

Voting at any general meeting takes place by a show of hands, or a poll where this is demanded, or otherwise directed by the chair. Subject to any rights or restrictions for the time being attached to any class or classes of shares, on a show of hands each shareholder is entitled to one vote and on a poll each shareholder is entitled to one vote for each share carrying voting rights of which he is a holder. In the case of equality of votes, whether on a show of hands or on a poll, the chair of the meeting shall have a second or casting vote. Shareholders who cannot participate in the general meeting may appoint a proxy by written or electronic notification to Plaza. Appointed proxy holders enjoy the same rights to participate in the general meeting as those to which the shareholder they represent is entitled. Every shareholder represented in person or by proxy is entitled to ask questions which are pertinent and related to the items on the agenda of the general meeting and to have such questions answered by the Directors or such persons as the Directors may delegate for such person.

The Directors' statement of responsibilities for preparing the financial statements is set out in the Directors' report.

The information required by Capital Markets Rule 5.97.5, where applicable for Plaza, is found in the Directors' Report. 

Approved by the Board of Directors on 27 April 2022.  

Remuneration report 

This statement on the remuneration of the board of directors and the Company's senior executive team, which refer to the Chief Executive Officer (the "CEO") as well as the Chief Financial Officer (the "CFO"), Finance & Admin. Executive, Centre Manager, Operations Manager and Marketing Manager of Plaza Centres plc (the "Company") has been drawn up in compliance with the requirements of Chapter 12 of the Capital Markets Rules and contains the information required by the provisions of Appendix 12.1 of the Capital Markets Rules.

The Company's remuneration of its board of directors and executive management is based on the remuneration policy adopted and approved by the shareholders at the annual general meeting of 14 October 2020.That policy is available for inspection on the Company's website at https://plaza-shopping.com. 

The Remuneration Policy

The Company's remuneration policy determines the basis for remuneration of all members of the board of directors, and the Chief Executive Officer ("CEO") of the Company.  It defines the principles and guidelines that apply to both fixed and variable remuneration, including all bonuses and benefits, which can be awarded to directors and, in the case of variable remuneration, indicate the relative proportion between fixed and variable components.

The Company's remuneration policy is intended as a measure to attract and retain suitable candidates for the position of directors and CEO, calculated to provide the Company with the appropriate skills, technical knowledge experience and expertise both for the determination of policies and strategies of the Company as well as the supervisory role of the board.

The overall remuneration of the board, the CEO consists of three components:

• The basic remuneration, consisting of fixed honoraria as sitting members of the board, or in the case of the CEO a fixed Salary;

• Additional remuneration where a member of the board is assigned additional duties to sit on or chair a board committee; and 

• A Bonus scheme linked to the performance of the Company. 

The Decision-making process with respect to remuneration

The aggregate emoluments that may be paid to the directors excluding the CEO (who are not members of the board) is decided upon by the shareholders in the annual general meeting following a recommendation made to shareholders by the board.

The board then decides on the remuneration of the Chairman and the other directors consisting of a fixed honorarium to each director.  The board also establishes and fixes the remuneration of the CEO with respect to his executive roles within the Company.

Key principles of remuneration

The board of directors of the Company consists of 6 individuals. During 2021, the Board was composed of two directors having an executive role as part of the Executive Committee and four other Directors acting in a non-executive capacity. The members of the Board for the year under review were Mr. Charles J. Farrugia (Chairman), Mr. David G. Curmi (resigned 23 June 2021), Prof. Emanuel P. Delia, Mr. Alan Mizzi (resigned 23 June 2021), Mr. Brian R. Mizzi, Mr. Alfredo Munoz Perez (appointed 23 June 2021), Mr. Etienne Sciberras and Mr. Gerald J. Zammit. 

The Board considers each of the following Directors as independent within the meaning of the Code. The non-executive Directors who held office at 31 December 2021 were the following:

1. Prof. Emanuel P. Delia 

2. Brian R. Mizzi; 

3. Alfredo Munoz Perez and

4. Etienne Sciberras 

In view of their role in the executive committee of the Company, Charles J. Farrugia (Chairman) and Gerald J. Zammit are not considered as independent directors. 

The aggregate remuneration approved by the shareholders for the financial year ended 31 December 2021 was set at €140,000, with €80,000 reserved for the fixed component and a maximum of €60,000 for the variable component. This includes the three components of remuneration. The total remuneration due to the directors during the financial year ended 31 December 2021 amounted to €109,268,which includes both the fixed and variable components.

The Chairman and the other directors

Fixed Component

The board believes that in line with local practice the fixed honorarium for directors is the principal component that compensates directors for their contribution as members of the board. The Chairman of the board receives a higher honorarium in view of the role of acting as the most senior director on the board and as the person responsible for chairing board meetings, and co-ordinating board assignments. 

Directors who are also delegated to sit on a sub-committee of the board or otherwise chair such sub-committee are paid additional fixed honoraria for each such assignment.

None of the directors have service contracts with the Company and each director serves from one annual general meeting to the next, when the appointment of directors is conducted at the annual general meeting. Accordingly, none of the directors have any entitlement to any compensation if they are removed from office.  Such removal would require an ordinary resolution of the shareholders at a general meeting.

The Directors are entitled to be paid travelling and other reasonable expenses incurred by them in the performance of their duties as directors.  

Variable Component

In addition to the fixed honorarium the chairman and the other directors of the Company are also entitled to a variable component of remuneration linked to the performance of the Company in that financial year.

In line with the Remuneration Policy approved by shareholders, the chairman and the other directors are entitled to a bonus payment based on the following basic criteria and subject to a cap of €60,000.  The bonus works on the basis of the following formula:

(5xOutperformance) x base remuneration of the Director

Where the term Outperformance refers to the percentage by which the profits before tax of the Group registered for a particular year exceed 105% of the profits before tax registered by the Group for the previous year, in both cases, in accordance with the audited financial statements of the Group for the respective years.

The table below shows the overall remuneration of Directors paid during the financial years ended 31 December 2021 and 2020:

Fixed Component

Variable Component

The Company does not remunerate the Chairman or the other directors in any other manner, nor does it provide any loans or other guarantees to them.

Other information on remuneration in terms of Appendix 12.1 of the Capital Markets Rules

In terms of the requirements within Appendix 12.1 of the Capital Market Rules, the following table presents the annual change of remuneration, of the company's performance, and of average remuneration on a full-time equivalent basis of the company's employees (other than directors) over the two most recent financial years. The Company's Directors and CEO have been excluded from the table below:-

The CEO 

The CEO of the company is not a member of the board, although he attends and participates at board meetings. The CEO has a service contract with the Company of a definite duration that entitles him to a fixed salary.

Fixed Remuneration - Salary

For the year under review the CEO received a gross salary of €63,861 (2020: €60,512) per annum. He is also covered by health insurance, life insurance, paid mobile phone and subscription, company car and fuel allowance in aggregate amounting to €11,860 (2020: €12,203).

Variable Remuneration - Bonus

The CEO is entitled to a discretionary bonus which is linked to the performance of the Company and the individual performance of the CEO over the course of the financial year.  The board sets targets at the beginning of the year to be reached by the CEO and then assess the performance against the benchmarks set at the beginning of each year and awards the bonus accordingly.

In the year 2021 the CEO received a bonus of €6,000 (2020: €5,600).

The Company does not remunerate its CEO in any other manner, nor does it provide any loans or other guarantees to him.  The CEO receives no remuneration from any other company in which the Company has a controlling interest.

The contents of the Remuneration report have been reviewed by the external auditor to ensure that the information required in terms of Appendix 12.1 to Chapter 12 of the Capital Markets Rules has been included.

Approved by the Board of Directors on 27 April 2022.  

Statements of financial position

The accompanying notes are an integral part of these financial statements.

The financial statements were approved and authorised for issue by the Board of Directors on 27 April 2022.  The financial statements were signed on behalf of the Board of Directors by Charles J Farrugia (Chairman) and Etienne Sciberras (Director) as per the Directors' Declaration on ESEF Annual Financial Report submitted in conjunction with the Annual Financial Report. 

Income statements

The accompanying notes are an integral part of these financial statements.

Statements of comprehensive income

The accompanying notes are an integral part of these financial statements.

Statements of changes in equity

The accompanying notes are an integral part of these financial statements.

Statements of cash flows